The Internet has already changed personal finance somewhat but there’s more to come. Much more.
Mint.com is the most successful personal finance program available online. And most personal finance systems for consumers are still based on systems that were developed years ago such as SWIFT, ACH, the ATM network and Maestro/Cirrus. Plus, there’s no dominant force in personal finance like eBay, Facebook and Amazon are in their respective spaces.
So how will it be altered?
The Internet is no longer just a collection of computers that store data and allow individuals to access an unprecedented amount of information. The founder of the immensely successful Dropbox, Drew Houston, built his company not as a service or product for people to use but for the Internet itself. This reflects the fact that the Internet is turning into a collection of services that can house new applications.
The leading providers
There are services coming on-stream that will be the construction blocks of new applications related to personal finance. Here are some of the leading companies in their respective industries.
Transaction data
The company Yodlee collects all of the historical transaction data from all the world’s major banks, which enables Mint and a slew of the other comparable products. Yodlee’s pricing prohibits the kind of amazing growth we expect when it comes to the Internet but in time it will probably change its model and will be the force behind the next generation of reporting tools for personal finance.
Payments online
Online payments are currently a very limiting area for building out personal finance apps. The company that’s leading in this area is Dwolla, which is working on the availability and integration of real-time data feeds to provide functionality and personal consumer trends similar to what’s available today in auto and health.
Offline payments
The company Square is a leading provider of point-of-sale technology. Starbucks invested a small amount in the company recently and has said it will roll out the service in its 6,800 U.S. stores. This is the first big step towards truly joining the Internet and point-of-sale in the real world.
In banking
The website Simple is the first total-service bank created from the very beginning with the banking experience focused on mobile. It is expected to change the bar for how technologically advanced a bank will have to be.
Yet to evolve
The mainstream may need personal-finance software but it doesn’t want it. I mean, who really enjoys going online to view their bank account? However, most people accept the fact that they need to know the amount of money they have as a signal of whether or not they can do whatever it is they want to do next (this is called binary information). The personal finance software that is yet to come will take binary data further by gathering data, such as online payments, off-line payments, historical transactions and banking–all in real-time – to provide helpful input for people so they can take control over their finances.
Like GPS systems
As raw data becomes more available and as input costs drop, personal finance applications will become less like something we use and more something that just goes around with us–like a GPS–based navigational system. When this happens, most of us will trust the application more than the person it has replaced. In the final analysis, decisions about personal finance–especially those that relate to our income, debt and spending–will be made by first consulting a tool.